We have identified a cysteine to tyrosine substitution in Cartilage- Derived Morphogenetic Protein-1 (CDMP-1) as the causative mutation of a clinically severe disorder, Grebe type chondrodyplasia (OMIM number 200700). Individuals homozygous for this autosomal recessive disorder exhibit severe limb shortening with digital and joint abnormalities. The lower limbs are affected more than the upper limbs and the degree of limb shortening progresses in a proximal to distal direction. We have studied the underlying mechanism of the mutation and have found that the defective CDMP-1 is not processed or secreted, and prevents the secretion of other, related, Bone morphogenetic Proteins (BMPs) through the formation of heterodimers. This type of mutation, called a dominant negative, is the first example of such a mutation in the TGF-beta superfamily. Its proposed mechanism of action provides the first compelling evidence for heterodimer formation between related BMPs in vivo. We have established a Collaborative Agreement (CRADA) with an industrial partner to provide us with recombinant CDMPs. This has allowed us to address the biological functions of CDMPs and compare their biological profile with other BMPs. Our data indicate that the CDMPs are functionally related to the BMPs and are capable of inducing cartilage and bone formation in an subcutaneous site in rats in vivo. Interestingly, there is a preferential stimulation of chondrogenesis as opposed to osteogenesis when compared with other BMPs. We propose that the underlying mechanism for this preferential chondrogenic activity is probably linked to their binding affinity for specific BMP receptor complexes.